From Green Right Now Reports
Whatever the state of the political debate about climate change, the issue increasingly looks settled in the board room. Despite challenging economic conditions and regulatory uncertainty, global executives believe that the climate change agenda will significantly impact business performance and strategy over the next few years according to a new survey by Ernst & Young.
The survey, “Action amid uncertainty: the business response to climate change,” found that corporate executives expect to make significant investments to deliver both cost savings and revenue generation opportunities relating to climate change. Seventy percent plan to increase spending on climate change initiatives between 2010 and 2012. Nearly half plan to spend between 0.5 percent to more than 5 percent of their revenue on climate change initiatives. For a U.S. $1 billion company, this represents an anticipated spend of $5 million to $50 million annually.
Three hundred global corporate executives from 16 countries with at least $1 billion in annual revenue participated in the survey conducted during spring 2010.
“Corporate leaders are not letting the lack of global standards and regulations slow their climate change investments,” Steve Starbuck, Americas Climate Change and Sustainability Services Leader at Ernst & Young LLP, said in a statement. “Other market drivers, such as equity analysts’ growing interest in climate change performance, are prompting a further need to act and be more transparent,”
Consumers and equity analysts are two of the factors driving this investment trend, Ernst & Young says. Corporate climate change activities are being driven by evolving customer demands according to 89 percent of survey respondents. Some sectors, including automotive, consumer products, and technology, unanimously agree that changing customer preferences have created significant drivers for action and innovation. Meanwhile, equity analysts are increasingly linking the business response to climate change and company valuations. Over 40 percent of the senior executives surveyed believe that equity analysts currently include climate change-related factors in company valuations.
Energy efficiency is at the top of the list as 82 percent of respondents plan to invest in this space over the next 12 months. About half of the respondents confirm new ventures, such as spin-offs or start-up businesses, as an area for focus. Additionally, 65 percent of executives intend to focus investments on new products and services.
Ninety four percent of respondents see national policies as important or very important in shaping their climate change strategies, although 81 percent recognize the importance of global or international policies.
“Keeping abreast of national climate change legislation and business incentives across jurisdictions will prove challenging, but necessary for many businesses, even those that do not traditionally regard themselves as multi-national due to the connectivity of supply chains and markets,” Dr. Lorraine Stephenson, Ernst & Young Partner and Oceania Climate Change Leader, said in a statement. “Businesses will need to prioritize investments to capture opportunities and mitigate risks in response to the growing number of climate change policies, in developing and developed countries, since the December Copenhagen meeting.”
Other key findings from the survey include:
- In the developing economies of China and India, executives rank product development as the top challenge to achieving their goals, 97 percent and 72percent respectively. Respondents in Australia, Canada, U.S., Japan, Germany and France indicate that regulatory and compliance issues present primary challenges in the next two years.
- Approximately 66 percent of respondents are discussing climate change programs with their suppliers and 36 percent of respondents are already working directly with these stakeholders to decrease the carbon in their supply chains.
- Transparent reporting is gaining momentum, as 64 percent of respondents report greenhouse gas data in an annual corporate social responsibility or sustainability report. Of the organizations that say they report, 62 percent verify their data through an independent, third-party.
The Ernst & Young study was performed by Verdantix, an independent analyst research organization focused on sustainable business. Respondents were drawn from across 16 countries and 18 industry sectors.